Cabinet nod for LNG option today

NEW DELHI, May 26: The proposal for a joint venture consortium between four oil and gas public sector companies for import of LNG (liquefie...

NEW DELHI, May 26: The proposal for a joint venture consortium between four oil and gas public sector companies for import of LNG (liquefied natural gas) has been expedited following delay and uncertainty over import of natural gas through pipelines from Oman and Iran to India. The LNG option, which was mooted barely a year ago, will come up for Cabinet approval today.

According to sources, the emerging delays in gas pipeline projects have made it necessary to expedite LNG project and consider larger imports of LNG to augment long term gas supplies. Other than diversifying the gas supplies to enhance security of supply, speedy approval and implementation of the LNG project would help meet the growing gas demand in South India, they said.

The supply-demand imbalance is expected to get worse from a deficit of 80 million cubic metres of gas per day (MCMD) in 1999-2000 to 120 MCMD in 2004-5, and to a deficit of 215 MCMD by 2009-10, said sources.

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The proposal before the Cabinet seeks approval for development of facilities for LNG import and its utilisation as fuel for power projects. The petroleum ministry has also sought the approval for forming a joint venture company of Gas Authority of India, Oil & Natural Gas Corporation, Indian Oil Corporation and Bharat Petroleum Corporation.

The JVC will be formed with an authorised capital of Rs 1,200 crore wherein the four public sector undertakings (PSUs) will hold a maximum of 50 % equity. Participation of each of the PSUs in the joint venture’s equity will be equal.

Upto 26 % of the equity would be offered to the multinational supplying the LNG. The balance will be offloaded to the public, says the proposal.

The four-member consortium would set up LNG import terminals at Cochin, Mangalore, Hazira, Ennore, etc. Each of the LNG terminals would have an initial handling capacity of 2.5 million tonnes per annum.

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It would also be empowered to participate in upstream and downstream sectors including setting up power plants. Additionally, it would have the option to set up subsidiaries to implement the projects at different locations.

The proposal also seeks approval for setting up a committee consisting of representatives from the four PSUs and from the ministries of finance and petroleum. The committee would provide guidance to the joint venture in selecting LNG supplier/partner as well as in negotiating the supply contract.

The petroleum ministry has also sought an `in-principle’ approval from the Cabinet for providing counter-guarantee for the first three LNG-based power projects.